“Casino” Context
Casino gaming is a highly popular activity in today's society. A particular individual's enjoyment of the casino gaming experience is often predicated on having an adequate supply of cash or other cash equivalents that allow the patron to participate in gaming activities such as slot machine and table game play. In the most basic form, the casino patron brings a specific amount of cash to the casino that can be exchanged for negotiable playing chips, casino issued gaming cards, or used with various gaming devices such as slot machines. Invariably, a casino patron may choose not to bring the desired amount of cash to the casino or the patron may deplete the supply of cash or cash equivalents brought to the casino before the casino patron is ready to end the gaming experience. Under these circumstances the patron will desire to obtain additional cash or cash equivalents through use of one or more financial instruments such as a debit card, credit card, or personal check where the casino patron maintains an account with all applicable financial institutions. For example, within the casino premises patrons generally have the ability to use an automated teller machine (“ATM”), cash a personal check, use a “debit card cash access” service, with or without a PIN, or a get a “cash advance” against their available credit card limit without a PIN.
The present invention addresses the use of a casino patron's Visa or MasterCard or like bankcard as a means to obtain cash, cash equivalent, or an item of value. Most casinos are equipped to accommodate “bankcard” transactions on the gaming floor or at the casino cage, which are commonly referred to as bankcard “quasi-cash,” wire transfer money order (WTMO), or “cash advance” or “quasi cash” transactions pursuant to the Visa and MasterCard and the like rules. In this instance, the casino patron presents a financial institution issued bankcard, such as a Visa card or MasterCard card or the like card, to a casino cage cashier to complete required quasi-cash procedures pursuant to Visa or MasterCard or like Association rules and regulations. Upon completion of these required procedures and receipt of a valid authorization for the quasi-cash transaction, the casino cage cashier will provide either cash or gaming chips for the amount of the authorization, less any surcharge or convenience fee charged to the cardholder.
To obtain a valid authorization from the casino patron's financial institution bankcard, the following are required: an electronic processing device capable of reading an account number encoded on a magnetic stripe of a bankcard or chip card, or an alternate means by which the cardholder's account number can be manually entered into the system; the ability to enter the cardholder's requested amount to be authorized; and the capability to electronically transmit the authorization request through the various payment processors and bankcard networks. Examples of common types of electronic processing devices located on casino premises include ATMs, point of sale terminals, personal computers with payment software applications residing locally or on a remote server, and multifunction ticket redemption kiosks. The electronic processing devices are connected via the internet or other direct line or telecommunication infrastructure to a Visa or MasterCard or like Association approved transaction processing service provider. The processing service provider electronically transmits the required transaction information (including the bankcard account number, requested amount and any surcharge or convenience fees) to a bank Network. Upon delivery of this electronic message by the processor to the financial institution bankcard issuer, the financial institution bankcard issuer will either authorizes an approval or denies the transaction requested. If the authorization is approved, a casino employee or other person designated by the casino to perform quasi-cash transactions completes the required Visa or MasterCard or like Association procedures and provide the cardholder the cash or item of value such as a money order, casino-issued gaming chips, casino-issued stored value card, or a stored value card issued by a financial institution.
Most often a casino, or the casino's third party service provider or acquirer, will impose a surcharge or convenience fee on the cardholder when performing a quasi-cash transaction. This surcharge or convenience fee, associated with bankcard quasi-cash transactions, is generally the most expensive alternative for the casino patron in relation to other options a patron has to get cash or cash equivalents in a casino. In a casino environment a patron may pay 10 times the amount or more, in surcharge or convenience fees for a quasi-cash transaction, that they would otherwise pay for a standard ATM transaction processed at the same location. To illustrate, a quasi-cash transaction for a credit card without a PIN may cost a cardholder 3.5% to 10% of the requested amount in surcharge or convenience fees; (the higher the requested amount the lower the percent.) A quasi cash transaction based on a debit card with a PIN may cost the cardholder 3.5% to 6.5% of the requested amount; (again, the higher the requested amount, the lower the percent.) The same cash request at a standard ATM may only cost the cardholder on average $4.00 in surcharge or convenience fees, or about 1% of a $500 request.
The high surcharge or convenience fees associated with bankcard quasi-cash transactions are a deterrent to a large population of casino patrons from using their bankcard, with or without a PIN, as their available means of accessing cash.
Occasionally, a casino may elect to waive the surcharge or convenience fee to specific patrons that are considered valuable or “high roller” customers.
Regardless of whether or not a surcharge or convenience fee is assessed by a casino operator, however, the quasi-cash transaction is electronically submitted, processed, and authorized using the same quasi-cash processing indicators, which include, among other things, the same Merchant Category Code (MCC) that identifies the transaction as quasi-cash.
Studies in casinos have shown that when the service fees or surcharges are waived for cash advance transactions, patron spending increases significantly, such as by 50% or more among the class for which the fees are waived. Even among the class of all patrons, spending has been shown to increase by a significant percent when cash advance fees are waived for a least certain classes of patrons, such as well known patrons or for transactions of high dollar amount. The casino, thus, has an incentive to waive the surcharge or convenience fees. Nonetheless, the processing service provider must pay a 2.3% “interchange” fee to the issuing bank of the card and by the Card Association, and will thus charge the casino what is referred to as a “buyrate” fee, which is typically 2.5% to 3.5%. The casino historically covers the processing service provider “buyrate” fee (as well as a commission for itself) out of the customer “surcharge.” If the casino waives the service fee or surcharge, the casino not only loses its commission but also loses money on every transaction of at least the “buyrate” charged by the processing service provider.
Thus, there is an incentive for a casino to waive patron service fees for quasi cash transactions, namely the documented “greater play” by patrons. There is also an incentive for the casino not to waive the fee, because the casino loses money on each quasi-cash transaction in that case. The casino has a tough decision. The instant invention offers a novel solution to the casino's tough decision, a clever way to improve the process.
The Fees Service Fees, Interchange, Buyrate
Visa and MasterCard and like Card Associations charge “interchange” fees to a casino, or to the service provider of a casino, for conducting quasi-cash transactions. (These fees, largely, are passed on to the card issuing bank.) Interchange fees for quasi-cash transactions are typically based on a percentage of the authorized requested amount and can vary depending on transaction qualifications criteria (i.e. swiped card capture vs. key entered card number) and whether or not the card is branded Visa or MasterCard or the like.
A patron request for a cash advance typically has an additional surcharge or convenience fee attached to it by the casino or service provider. The “authorization request” will be for the sum of two amounts, requested amount and surcharge.
“Interchange” is assessed on this total transaction amount and is typically paid by the service provider of the quasi-cash transaction. The service provider subsequently charges the casino a fee, commonly referred to as a “buyrate” in the casino industry, to cover the service provider's costs of the interchange, other expenses, and profit. A typical buyrate fee charged to a casino for a quasi-cash transaction ranges from 2.5%-3.5% of the transaction amount authorized.
Service fees on credit card quasi cash transactions without a PIN typically have a tiered rate structure such that the lower dollar amount requested carries a higher service fee and a larger requested dollar amount carries lower fees.
Examples of typical service fees for credit card:
$100=$9.99 fee=10%
$500=$39.99 fee=8%
$1000=$69.99 fee=7%
$5000=$174.99 fee=3.5%
As it relates to debit card with a PIN the fee is generally a flat fee per transaction plus percentage, say $2.95 plus 3.5% of the amount requested.
Examples of typical service fees for debit card:
$100=$6.45 fee=6.45%
$500=$20.45 fee=4%
$1000=$27.95 fee=3.8%
$5000=$177.95 fee=3.5%
The “buyrate” is the fee charged by the service provider of the transaction to the casino. The buyrate range is 2.5%-3.5%. The buyrate typically gets calculated as follows, using an example from above for a credit card.
Example of buyrate calculation when fee is charged:
Amount=$500
Fee=$39.99
Total amount+fee=$539.99
Buyrate is calculated by taking the $539.99 and multiplying by 3.5% to reach $18.99, the buyrate to be paid to the service provider. The casino makes, as a “commission,” the difference between the service fee the casino charged (e.g. of $39.99) minus the buyrate (e.g. of $18.99), which is $21.00 for the casino commission
The service provider pays the interchange out of their buyrate, which interchange is 2.30%. So out of the $18.99 buyrate the service provider will pay $12.40 as interchange to the Association. (Again, interchange is based on total amount+fee.) This generates a net profit to the service provider of $6.59: ($18.99 buyrate minus $12.40 interchange).
If a service fee were not charged the patron by the casino, the following economics occur. Buyrate calculation when a fee not charged (quasi-cash transaction)
Amount=$500
Service Fee=$0.00
Total amount+fee=$500.00
Buyrate is $500.00 multiplied by 3.5%, or $17.50, to be paid to the service provider by the casino.
Since there is no service fee charged the patron, the casino receives no commission and has to pay $17.50 to the service provider.
The service provider again pays the interchange out of the buyrate which interchange is 2.30%. So out of the $17.50 to the service provider they will pay $11.50 as interchange deduction, generating a net profit to the service provider of $6.00 ($17.50 buyrate minus $11.50 interchange).
The high buyrate charged by the service provider to the casino is one of several factors mitigating against a broad adoption of a “no fee” strategy by casinos for patron bankcard use to secure a cash advance.
For a dramatically different economic model, financial institutions that are “Principal Members” of Visa or MasterCard or like Associations and their authorized agents can be authorized to provide cash advance services to their patrons. These institutions, which have obtained the requisite banking regulator approval, can make available to the general public a service, for Visa or MasterCard or the like cardholders, (bankcard holders) to obtain cash as Manual Cash Disbursement (“MCD.”) The cash can be obtained directly through the Principal Member or other financial institution agents designated by the Principal Member.
Among other requirements imposed by Visa and MasterCard and the like MCD transactions prohibit additional surcharge or convenience fees, and mandate that only cash must be provided to the cardholder; cash equivalents are not accepted.
The economics associated with MCD transactions are materially different than those of quasi-cash transactions. Most notable among these distinctions is that, as a Principal Member of Visa and MasterCard and the like or as an authorized financial institution agent of such, these financial institutions do not pay “interchange” fees when providing MCD services. Rather they receive “interchange.”
Here is the compelling math of MCD:
Example of MCD when fee is not charged. Assume the service provider is an authorized financial institution agent of a Principal Member
Amount=$500
Fee=$0.00
Total amount+fee=$500.00
Assume no buyrate is calculated or charged because interchange will be paid to the service provider and there is no buyrate charged to the casino. The service provider authorized financial institution agent gets paid interchange from the card issuing bank of $2.00.
Thus, a “No Fee” quasi cash transactions costs the casino $17.50. A “No Fee” MCD transactions costs the casino $0.00. Event if the casino made the service provider whole, to some extent, there is significant savings.
Were the casino service provider an MCD authorized financial institution agent of a Principal Member of the Card Association, this economic shift in the imposition of interchange fees could facilitate casino operators adopting a broad “no fee” strategy for card cash advance transactions, and incentivize service providers to adopt a significant or low “buyrate.” This approach not only offers cost savings to both the casino operator and the patron, but presents a meaningful new opportunity for the casino to grow its revenue.
In order for this dramatic shift in cash disbursement methodology to occur, a casino location must meet a financial institution status by a state or federal banking regulator so as to qualify for offering MCD transactions as an authorized agent of a Principal Member of Visa or MasterCard or the like. An important aspect of the instant invention is disconcerting and determining that this is possible.
The present invention proposes to offer a casino location an ability to process both quasi-cash and MCD transactions. An important fact which makes the present invention startling, is recognizing that these two distinct transaction types, quasi cash and MCD, have been supported by Visa and MasterCard and the like for more than 20 years, yet no one has offered the two in conjunction with one another.
To summarize, this environment of quasi-cash and MCD coexistence provides following direct benefits:
1. Provides a direct economic benefit for both the casino and patron by providing for processing transactions where patron service fees are not charged, or are waived, where interchange charges are “reversed,” and where a buyrate charged by the service provider to the casino can be significantly reduced.
2. Provides an incentive to the casino to offer bankcard transactions without a patron fee, which would materially increase the number of cash advance transactions in a given location, as well as economic flexibility to offer bankcard transactions for no fee on a periodic or promotional basis to increase business levels either from all patrons or to a targeted segment of patrons or transaction amounts without modifying the underlying technology. Due to the high fees generally charged on bankcard transactions, the elasticity of demand for quasi-cash transactions is very steep and strongly discourages use. High fees generally charged on bankcard transactions strongly discourages use and the demand for quasi-cash transactions is highly elastic in favor of transactions where no fees are applied
3. Provides economic benefit for card issuers by significantly increasing bank card transactions in a casino environment.
Preferably the invention creates cost efficiencies due to an ability to provide seamless integrating of computing software and workstation device peripherals for both traditional quasi-cash and MCD transactions.
As is frequently the case, the instant invention developed as a clever improvement for a casino environment but appears to have application to certain other merchant environments, referred to as similar merchants. Thus “casinos” herein should be understood to include non-bank merchants who could receive cash advance requests associated with presented bankcards and to whom the invention could provide advantages. The instant invention could support any similar merchant, or “casino,” that is considered a financial institution or an agent of Member.
In the following “bankcard” refers to an open system card association card, a card processed over a card network, such as a credit card, debit card, open system stored value card or the like. These cards are issued by a bank or other financial institution that is a member of the Card Association or by an affiliate or authorized agent thereof, and are typically branded with Visa or MasterCard or another like Association.
“Authorized MCD processor” refers to an authorized MCD processor and/or its authorized agent.
A “cardholder” is one to whom a “bankcard” has been issued.
An issuer or issuing bank is a member of the Card Association, or is an agent or affiliate of a Member, who enters into a contractual relationship with a cardholder for the issuance of one or more bankcards.
“Cash disbursement” refers to currency, including traveler's checks, that is paid out to a cardholder using a card. An ATM cash disbursement is the most typical.
A “manual cash disbursement” or “MCD” is a cash disbursement obtained with a bankcard in a face-to-face environment. A face-to-face environment implies that a card is presented. A cardholder and an individual representing the merchant are required to be present to complete the transaction.
Card Associations, such as Visa or MasterCard or the like, have a variety of types of members. One type of member is a Principal Member. Principal Members can be authorized to perform MCD, as well as their authorized agents.
A quasi-cash transaction is a transaction representing a merchant's, or a member's, sale of items directly convertible to cash, such as gaming chips, money orders, deposits, wire transfer, traveler's checks, Visa travel money cards, foreign currency, and the like.
A “processor” is a Card Association member or approved non-member, who is directly connected to a Network and provides settlement services for merchants and members.
An “indicated transaction” refers to a cash advance request which is indicated as appropriate for MCD processing, in particular to and/or by processing software. Various algorithms could be adopted. All requests might be indicated, or only certain qualifying or tagged requests.
The invention relates to an improved method for processing bankcard “cash advance” transactions at a casino, which method includes utilizing a principal member of a Card Association, or more likely an authorized agent of a Principal Member, for optionally processing non-service-fee/non-surcharge transactions as Manual Cash Disbursements.
A system and method is disclosed which facilitates bankcard cash advance transactions at casinos for customers. In a preferred embodiment the system and method includes receiving a transaction request related to a bankcard by a processing service provider, the processor having recourse to indicia of the applicability of a surcharge. When a cash advance transaction is to be processed without charging a customer a surcharge or service fee, the MCD authorized principal member, more likely or its authorized agent may process the transaction as a “Manual Cash Disbursement” transaction. When a transaction is to be processed inclusive of a customer surcharge or service fee, the service provider will process the transaction as a “quasi-cash” transaction.
Preferably, a processing device and/or a processing service provider, intermediate or ultimate, interprets a transaction record and/or other available data and determines the appropriate processing method, most preferably based upon the presence or absence of an indicia of a service-fee/surcharge. Cash disbursement information is preferably electronically generated by a processing system provider and sent to either an intermediary processor, who forwards the relevant information to an appropriate processing Network or Card Association Network, or is sent directly to an appropriate processing Network or Card Association Network. The system interpretation of the existence of a service-fee/surcharge or not can occur at various locations and stages, such as at an automated terminal, or at an automated centralized system at a merchant location, or at a location that supports multiple merchant locations, or at an intermediary processor.
The present invention relates to improved systems and methods for performing cash advance transactions at a merchant for a customer. More particularly, it relates to systems and methods for use in particular in a casino to dynamically process cash advance transactions using either Manual Cash Disbursement processing methods and systems or Quasi-Cash processing methods and systems. The choice is typically based on whether a service-fee or surcharge has been, or is to be, included in the transaction authorization request.
“Merchant” and “casino” are used herein to indicate commercial entities that provide or might advantageously provide cash advance transactions for customers as an adjunct to providing significant non-banking goods and/or services. In the following discussion a merchant may be paradigmatically referred to as a casino, which is an exemplary merchant for the instant invention. The invention, however, is potentially applicable to a variety of merchants. “Casino,” thus, should be understood to cover similar merchants.